Goldman Sachs has revised its India GDP growth forecast for 2026 upwards to 6.9% following a new trade agreement between the United States and India. The deal, announced by U.S. President Donald Trump, involves a reduction in U.S. tariffs on Indian goods. The investment bank anticipates that these lower tariffs will provide a boost to India's GDP and foster a more favorable environment for private investment.
Key Aspects of the Trade Agreement
Under the new agreement, reciprocal tariffs on Indian goods will decrease from 25% to 18%, effective immediately. Goldman Sachs estimates this tariff reduction could add approximately 0.2 percentage points to India's GDP. The move is also expected to reduce trade-policy uncertainty. The report added that the deal would lower India's tariff rate and bring it in line with most other Asian countries of around 15-19%.
Impact on Indian Economy
The tariff reduction is expected to support India's GDP growth and benefit equity markets, especially export-oriented and manufacturing-linked stocks. Market analysts foresee potential benefits across electronics, industrial goods, and downstream services as companies reassess their sourcing strategies. Improved trade conditions could strengthen corporate balance sheets, increase demand for working capital, and boost long-term project financing, particularly in sectors aligned with India's production-linked incentive (PLI) programs and infrastructure expansion.
Sector-Specific Benefits
Export-oriented sectors like engineering goods, electronics, textiles, leather, agriculture, and marine products are likely to experience immediate gains. Reduced tariffs enhance price competitiveness in the U.S. market, especially when compared to Asian countries such as Vietnam, Bangladesh, and Malaysia. For multinational companies with manufacturing bases in India, the agreement lowers tariff risk on exports to the U.S., improves margin visibility, and strengthens the rationale for expanding production and supply chains in India.
The gems and jewellery industry is expected to benefit from the tariff reductions, which have been under pressure since tariffs were imposed last year. The proposed deal could revive exports, improve employment prospects, and stabilize supply chains that have been disrupted. Shares of jewellery companies have already shown a surge in response to the announced tariff reductions.
Broader Implications and Risks
The U.S. deal complements India's broader trade strategy, which includes recent trade agreements with New Zealand, the EU, and Oman, aimed at expanding export markets and reducing dependence on any single geography. While the tariff reduction restores near-term predictability, full policy certainty will depend on the finalization of operational and regulatory details. Businesses should watch out for potential risks, including delays in formal notifications, ambiguity around rules of origin, non-tariff barriers, and phased implementation.
Earlier Forecasts
It's worth noting that in December 2025, Goldman Sachs had predicted India's real GDP growth at around 6.7% in 2026 and 6.8% in 2027, outpacing consensus estimates. At that time, they noted that India's growth would be driven by strong domestic consumption, public infrastructure spending and limited exposure to global trade disruptions.